When you’re launching a new business, your exit strategy may not be top of mind – but perhaps it should be, says Scott McCamis, a tax lawyer with MLT Aikins in Edmonton.
That’s because the way you structure your business will have an impact on the taxes you pay when you decide to sell. And if you wait too long to think about your business structure, it could be too late to do anything about it.
“Sometimes we have clients come to us on the eve of a sale,” Scott said in a recent episode of the Ask a Vexxpert podcast. “The deal’s already on the table and they’re saying ‘How can I pay the least tax possible?’”
At that stage, there may not be much you can do. But thinking about whether you structure your business as a sole proprietorship, a partnership or a corporation from the outset can help you plan for a tax-efficient sale down the road.
“It’s never too early to think about [your exit plan],” Scott said. “The best time to think about it is right at the beginning, and the second best time is now.”
Certain strategies – such as naming family members as shareholders or using a family trust to hold your company – can help minimize the tax bill when it’s time to sell, Scott noted.
Scott has extensive experience advising private and public entities on tax planning and corporate reorganizations. He has completed Levels 1 – 3 of CPA Canada’s In-Depth Tax Program, and regularly presents at tax- and estate-planning conferences.
During his interview with Ask a Vexxpert, Scott said business owners shouldn’t be wary of the tax system.
“In the tax system, I see more opportunities than problems,” he said. “If you really know the rules and know how to navigate your way around them, there are a lot of opportunities to keep more of your money.”